TESLA IS TUMBLING

A labourer repairs a
street lamp next to a logo of Tesla Motors in front of a new
showroom of the company in Shanghai.REUTERS/Stringer

Electric car-maker Tesla has just released its Q1 financial
results.

Adjusted earnings per share came in at $0.12 per share, which was
higher than the $0.07 expected by analysts surveyed by Bloomberg.

During the quarter, the company produced 7,535 models S and
delivered 6,457.

"While [deliveries] exceeded the average of seven analysts'
estimates, it was less than the highest estimate," reported
Bloomberg's Alan Ohnsman.

The stock is down by around 6% in after-hours trading.

Management expects about 7,500 deliveries in Q2 and says it's on
track for 35,000 deliveries for the year.

"We are expanding our factory capacity to support increased Model
S production later this year and the introduction of Model X next
year,"
said CEO Elon Musk.

In March, Tesla stated in its annual report that it had
"decided to slightly push back the development and timing of
Model X to 2014" from its initial target for
late 2013.

"We still plan to invest $650-850 million for the year in capital
expenditures for increased production capacity, growth in our
store, service center and Supercharger footprints, Model X and S
development and start of Gigafactory construction," said Musk.
"With all these initiatives, we expect to be slightly free cash
flow negative in 2014, before considering the equity required for
leasing."

Management expects gross margins to "increase slightly" from Q1
to Q2 and be "marginally profitable in Q2 on a non-GAAP basis."

According to Bloomberg, analysts on average were forecasting the
company to earn $0.20 per share.

Tesla's up 33% since the
beginning of the year.Google
Finance

Why The Sell-Off?

Everyone's still trying to figure out what it was about the
announcement that has traders and investors disappointed.

From the looks of it, it's probably the weak EPS guidance.

It's worth noting that Tesla's stock price is still up over 30%
since the beginning of the year, which compares to the Nasdaq's
2.6% decline. Tesla is also up 270% from a year ago.

That Direct-Sales Model

"While consumers and the vast majority of jurisdictions have
overwhelmingly welcomed our direct-sales model, there are still a
few states in the U. S. where we face resistance," said Musk
today. "In those states, we continue to fight to protect our
customers’ ability to buy directly from Tesla. We believe
strongly in the fairness of our position, which has been
supported by a long list of consumer activists, economists and
influential policy makers."